US, IEA ready to use strategic oil stocks

Washington, June 9, 2011

Oil consuming nations said they stood ready to tap into emergency stocks if Saudi Arabia didn't quickly pump more oil, responding with dismay to Opec's failure to agree an increase in output.

Unusually blunt references from both the White House and the International Energy Agency to drawing down the industrialised world's 1.5 billion barrels in government-controlled oil inventories follows the shocking breakdown in talks of the Organization of the Petroleum Exporting Countries in Vienna.

With Opec failing to reach agreement for even a modest increase in production, consumers put their hope in the group's top producer Saudi Arabia, which insisted it would pump more unilaterally to ensure that a shortage of oil didn't cause another crippling price spike.

"If Saudi cannot fill the whole gap ... we have to move by releasing oil stocks," Nobuo Tanaka, the executive director of the Paris-based IEA, the industrialised world's energy watchdog, said at an oil conference in Washington.

He said the IEA would know in a few weeks if the kingdom had ramped up output. "We are ready to move," he said.

Tanaka said the IEA was pleased some key Opec members were willing to make more oil available. But it was disappointed Opec could not agree to an output hike, even after an unusually frank plea from the agency last month.

White House spokesman Jay Carney said after the Opec meeting the administration was concerned about a lack of supply and that it was keeping the option open to use the 727 million barrel US Strategic Petroleum Reserve.

"We believe that we are in a situation where supply does not meet demand," Carney told reporters, one of his strongest statements to date on the market outlook.

Those statements underscored the deep unease in the industrialised world about the danger of $100-plus oil prices to a fragile global economy, and the willingness to use any available tools to fight them.

Oil prices jumped by more than $2 a barrel after the Opec meeting broke up, but ended off those peaks after traders factored in the possibility of tapping into reserves. - Reuters